The Dow Peaked At 14,000 Before The Last Stock Market Crash, And Now Dow 24,000 Is Here

The absurdity that we are witnessing in the financial markets is absolutely breathtaking. Just recently, a good friend reminded me that the Dow peaked at just above 14,000 before the last stock market crash, and stock prices were definitely over-inflated at that time. Subsequently the Dow crashed below 7,000 before rebounding, and now thanks to this week’s rally we on the threshold of Dow 24,000. When you look at a chart of the Dow Jones Industrial Average, you would be tempted to think that we must be in the greatest economic boom in American history, but the truth is that our economy has only grown by an average of just 1.33 percent over the last 10 years. Every crazy stock market bubble throughout our history has always ended badly, and this one will be no exception.

And even though the Dow showed a nice gain on Wednesday, the Nasdaq got absolutely hammered. In fact, almost every major tech stock was down big. The following comes from CNN…

Momentum darlings Nvidia (NVDA, Tech30) and PayPal (PYPL, Tech30) and red hot gaming stocks Electronic Arts (EA, Tech30) and Activision Blizzard (ATVI, Tech30) plunged too. They have been some of the market’s top stocks throughout most of 2017.

Many believe that the markets are about to turn down in a major way. What goes up must eventually come down, and at this point even Goldman Sachs is warning that a bear market is coming…

“It has seldom been the case that equities, bonds and credit have been similarly expensive at the same time, only in the Roaring ’20s and the Golden ’50s,” Goldman Sachs International strategists including Christian Mueller-Glissman wrote in a note this week. “All good things must come to an end” and “there will be a bear market, eventually” they said.

As central banks cut back their quantitative easing, pushing up the premiums investors demand to hold longer-dated bonds, returns are “likely to be lower across assets” over the medium term, the analysts said. A second, less likely, scenario would involve “fast pain.” Stock and bond valuations would both get hit, with the mix depending on whether the trigger involved a negative growth shock, or a growth shock alongside an inflation pick-up.

Nobody believes that this crazy stock market party can go on forever.

These days, the real debate seems to be between those that are convinced that the markets will crash violently and those that believe that a “soft landing” can be achieved.

I would definitely be in favor of a “soft landing”, but those that have followed my work for an extended period of time know that I do not think that this will happen. And with each passing day, more prominent voices in the financial world are coming to the same conclusion. Here is one recent example…

Vanguard’s chief economist Joe Davis said investors need to be prepared for a significant downturn in the stock market, which is now at a 70 percent chance of crashing. That chance is significantly higher than it has been over the past 60 years.

The economist added,“It’s unreasonable to expect rates of returns, which exceeded our own bullish forecast from 2010, to continue.”

A stock market crash has followed every major stock bubble in our history, and right at this moment we are in the terminal phase of one of the greatest stock market bubbles ever. There are so many indicators that are screaming that we are in danger, and one of the favorite ones that I like to point to is margin debt. The following commentary and chart were recently published by Wolf Richter…

This chart shows margin debt (red line, left scale) and the S&P 500 (blue line, right scale), both adjusted for inflation to tune out the effects of the dwindling value of the dollar over the decades (chart by Advisor Perspectives):

Stock market leverage is the big accelerator on the way up. Leverage supplies liquidity that has been freshly created by the lender. This isn’t money moving from one asset to another. This is money that is being created to be plowed into stocks. And when stocks sink, leverage becomes the big accelerator on the way down.

Markets tend to go down much faster than they go up, and I have a feeling that when this market crashes it is going to happen very, very rapidly.

The only reason stock prices ever got this high in the first place was due to unprecedented intervention by global central banks. They created trillions of dollars out of thin air and plowed those funds directly into the financial markets, and of course that was going to inflate asset prices.

Even Federal Reserve Chair Janet Yellen says that she is concerned about causing “a boom-bust condition in the economy”, and yet she insists that the Fed is going to continue to gradually raise rates anyway…

Federal Reserve Chair Janet Yellen said the central bank is concerned with growth get out of hand and thus is committed to continuing to raise rates in a gradual manner.

“We don’t want to cause a boom-bust condition in the economy,” Yellen told Congress in her semiannual testimony Wednesday.

While Yellen did not specifically commit to a December rate hike, her comments indicated that her views have not changed with her desire for the central bank to continue normalizing policy after years of historically high accommodation.

I never thought that this stock market bubble would get this large. We are way, way overdue for a financial correction, but right now we are in a party that never seems to end.

But end it will, and when that happens the pain that will be experienced on Wall Street will be unlike anything that we have ever seen before.

Michael T. Snyder is a graduate of the University of Florida law school and he worked as an attorney in the heart of Washington D.C. for a number of years.Today, Michael is best known for his work as the publisher of The Economic Collapse Blog and The American Dream.

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Trader Bob bought some stocks
Stashed in a safe with many locks
“I’ll be rich” he’d always say
Against all odds he’d make his play
I’ll retire and live the dream
The market seemed to go full steam
Then one day it all went down
And his portfolio ate the ground
His worthless papers were no good
He never listened like he should
Now a broke and homeless man
The victim of a foolish plan
He sat and cried “it’s all so cruel”
A broken, sad and desperate fool…..

Jim in Va: If folks are still in the market (older yet still working or retired), call broker and put a stop loss on div. paying stocks, if it drops, park money in a state tax free muni fund (Franklin T., Vanguard, etc) or in state tax free high rated muni, or a money mkt savings. Those w. 401k not close to retirement need to diversify into several fund categories. Older workers need to get into Treasuries which we have done.

The Rothchilds, Soros, Buffets, Zukerbergs, and all the other
multi-billionaire Communists, are buying…..BUT when they all dump their
stocks one day (insider trading) and make millions per day causing the
market to take a dive to the dumpster bottom…..the small investor
with a few piddley stocks will lose everything.

They do this time and time again….it has become
a game of roulette. The little guy not paying attention, only makes a
a few hundred dollars or loses everything.

aljamo – I’m of a like mind with you. I hope it does ‘pop’ as you say. Those at the very top of the financial food-chain getting wealthier and wealthier not by actual work or effort; merely by, just having money to start with and playing the world like some sort of roulette wheel. Just gambling to them. The stock market nothing more than a big Monte Carlo or Vegas to them. My philosophy has always been that stocks were for true investment out of a belief in some company, product or person/driving force in that company. If you say made one heck of hot sauce or some widget and I thought too that if only you had a backer to increase production or be able to make more maybe at a lower cost…. and allowed me to loan/invest with you type of thing. If it worked, the additional money I invested made a difference, I’d get a return of my initial amount and a share of the profit. Naive, huh? The way it is now is a bunch of rich A-holes who wouldn’t know a nail from a screw just looking at charts and graphs, receiving vast support from agencies like the Fed and governments for doing nothing – not even accepting risks. Yeah, let it pop and let’s reset the whole thing. Bring back the real purpose for investment. Take the whole system to zero.

You got to “know when to hold them” and “know when to fold them”. You win by buying at the right time and selling at the right time. Could the stock market have something in common with playing poker? They should put up signs in the financial district of New York City advising tourists that in the event of a stock market crash to beware of falling stock market investors.

Meanwhile, back at the ranch, any idea how much pm we have bought with the dividends? Not everyone lets it all ride or spends every penny on amazon purchases. When it crashes we will deal with it. I don’t mean to be a smartass it’s just that there are varying approaches. Well balanced has always seemed to work pretty well.

Bitcoin, that vaporware fiat derivative of a fiat dollar. I think of Bitcoin as some imaginary coupon, that without notice, by Presidential fiat, could immediately make all transactions of the aforementioned nonsensical illegal within the USA, and I bet the NSA has the software to do it too. So have fun crossing the boarder in order to by a case of Hamm’s with your Bitcoin.

DJIA is guaranteed to pass 100,000 and S&P500 pass 20,000 by 2050, due to $75 trillion has to be created in order to expand today’s economy, make it large enough to pay for the governmental obligations of 2050. Only a few things will stop that from happening. I wouldn’t bet against the FED and the world central banks, they have infinity dollars to play with. If you are short, you have no one to blame. OBTW, the so called tax cuts were rushed out due to the fact that immigration is slowing, and the economy will stall if immigration stops, therefore, the tax cuts put more money “borrowed” back to the people – at the same time the national debt balloons, and money printing balloons, and the stock markets continue going up up up!! I wouldn’t bet on anything higher than a 5% short lived fall in the markets, only to have them rally back in a few weeks to even more all time highs. But that doesn’t sell prepper seeds, cassette tapes, books and k-rations.

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